Corporate Social Responsibilities Persuasive Essay Example

corporate citizens (Hemphill 2004).

According to the Commission of the European Communities (as cited in Cheers, 2011), businesses should integrate social and environmental concerns into their operations and communicate with stakeholders beyond what is legally required. Diverse perspectives on social responsibility stem from different assumptions. It is essential to examine the intricate connection between business and society in order to create a successful model for each organization (Ramachandran, 2010).

Milton Friedman, the prominent advocate of modern capitalism, was honored with the Nobel Prize in Economics in 1976 due to his significant contributions to monetary history and theory, consumption analysis, and stabilization policy (Schwartz & Saiia 2012). Despite his lack of concern for the social responsibility of businesses (Jones 2007), Friedman expressed his opposition to social responsibility through a contentious statement in an article published in the New York Time Magazines in 1970: 'The social responsibility of business is to increase its profits.'

According to Friedman's book 'Capitalism and Freedom' (published in 1962), businesses should prioritize maximizing profits for shareholders while also following legal and ethical standards (Friedman, cited in Jones 2007). This viewpoint has greatly influenced the concept of social responsibility.

According to Feldman (2007), he is seen as a significant advocate for the viewpoint of shareholders in relation to the social responsibility of business. Most articles and research on this topic make reference to or question his perspective. It is important to note that Friedman's view on the social responsibilities of business is limited, focusing on the narrow objectives of shareholders and the narrow responsibilities of company executives (Lee & McKenzie 1994). To begin with, Friedman breaks down the representation

of an organization into individual executives (Jones 2005).

According to Friedman (1970), business is considered an artificial person under the law, meaning that only individuals can be held responsible for social responsibility. He argues that shareholders, who are solely motivated by maximizing profits, own the company. In simpler terms, Friedman believes that businesses prioritize making profits and society should address any other societal matters (Grant 1991). This viewpoint highlights the significance of individuals as the ultimate entity in society (Ghoshal 2005, p. 83), asserting that all ethical issues must be dealt with by individuals.

According to Friedman's theory, shareholders are not obligated to instruct company executives on social responsibility. If either the shareholders or executives choose to engage in social responsibility, they should do so individually and at their own expense. Friedman asserts that businesses should prioritize increasing profits for the betterment of society. This perspective aligns with his belief in "the principle of freedom" within society. He argues that business involvement in social responsibility weakens the foundations of a free society. Adam Smith's "self-interest" doctrine also supports this viewpoint, as he contends that individuals pursuing their own interests contribute most effectively to society (Schaefer 2008, Drucker cited in Jones n., Cosans 2009 p. 392, Ghoshal 2005).

The concept of the "invisible hand" applies to business too, implying that businesses have the liberty to pursue profits that can be advantageous for both themselves and society (Cosans 2009). Nevertheless, it is important to acknowledge that in a society with multiple large corporations, the power wielded by these corporations diminishes the impact of the "invisible hand." Consequently, this dominance can lead to heightened social

inequalities instead (Schaefer 2008).

The Agency theory states that corporate executives are agents for shareholders and have a fiduciary duty. They must prioritize enhancing shareholder value and are not obligated to use shareholders' funds for social responsibility initiatives (Schaefer 2008).

Taking a different approach in business can harm both shareholders and society as it can lead to inefficiency, reduced production, and financial losses or collapse for businesses due to the negative impacts of social responsibility (Schaefer 2008). Therefore, some argue that social responsibility does not benefit businesses (Feldman 2007). However, it is crucial to note that shareholders do not own the business itself; they only have rights to its cash flows (Ghoshal 2005).

According to Grant (cited in Cosans 2009), corporate executives should focus on managing company activities rather than solely prioritizing profit maximization for shareholders. Bob Dudley, the Group Chief Executive of BP Corporation, shares Friedman's belief that generating profits for shareholders is a crucial aspect of business. However, Dudley also emphasizes the broader relationship between business and society.

In 2011, Dudley emphasized that business activities have the goal of benefiting society and individuals because businesses are a part of society. As a part of society, firms cannot overlook the context in which they operate. This wider stakeholder perspective highlights the significance of considering the benefits of other stakeholders, including customers, suppliers, employees, and managers, alongside shareholders when making business decisions. This is because the values of a company are created through the resources contributed by various parties (Goshall 2005).

Jamali (2007) states that if a business fails to meet the demands of other parties, it may not be

able to fully maximize profits for its shareholders. In simpler terms, even if a business focuses on serving its shareholders, its ability to do so can be affected by other stakeholders (Freeman et al. 2004). However, it is crucial to acknowledge that businesses incur costs when engaging in social responsibility from the viewpoint of stakeholders, and these expenses can impact shareholder returns.

According to Marcoux (2003), company leaders encounter challenges in managing the conflicting interests of shareholders, employees, customers, suppliers, and communities when making decisions. Moreover, determining the priority of stakeholders based on their significance is also a difficult task for businesses. Jensen (2002) contends that while certain stakeholders may be contented, others may feel let down. In such circumstances, adopting a long-term approach indicates that prioritizing the viewpoint of shareholders is more feasible.

According to Danielson et al. (cited in Cheers 2011), the best approach for business leaders to reconcile conflicting interests of various stakeholders when making decisions is by not solely adopting a stakeholder perspective. Friedman (1970) contends that businesses should only partake in activities that adhere to legal regulations and ethical rules in order to fulfill their social responsibility. However, Dudley (2011) recognizes that companies should surpass what is legally mandated. Being socially responsible entails voluntary efforts by firms to act beyond legal requirements.

Friedman's concept of ethical rules is mentioned in the text without specifying the details of these rules for ethical behavior (Feldman 2007). Friedman argues that businesses are permitted to participate in practices such as overcharging customers, downsizing without notice, and treating suppliers coercively in order to maximize profits (Schaefer 2008). However, there is an increasing

interest among business practitioners regarding the social responsibility of businesses (Branco ; Rodrigues 2006).

Despite facing initial resistance from corporate leaders, businesses are now obligated to consider the ethical consequences of their actions. In addition to company shareholders, external stakeholders and the environment also have a substantial influence on shaping organizational practices (Freeman et al. 2004). However, the implementation and benefits of the social responsibility doctrine can differ among various industries.

The location of the firm also plays a significant role in the social responsibility behavior and practices of business (Lee, cited in Cheers 2011). According to a study from the Journal of Business Ethics, this factor can affect the components, level, and motives of the organization's social behavior (Sotorrio & Sanchez 2008). The shareholders-focused model is less popular in some European countries and Asia compared to the United States (Kakabadse 2005). This difference exists because the shareholders theory was first introduced and implemented in the United States.

In contrast, European firms have to satisfy broader stakeholders in terms of more demanding consumer desires, stronger media pressure, and more rigorous governmental regulations relating to social responsibilities of business (Cheers 2011). However, recent American corporation scandals including Goldman Sachs, Enron, Worldcom, and Tyco have resulted in the global financial crisis in 1998. The collapse of these big corporations has called for public attention in the sustainability of business.

According to Freeman et al. (2004), the failure of certain companies exposes the inefficiencies of shareholder theory. These companies focused on maximizing short term values for shareholders, sometimes at the expense of fraudulent activities that prioritized personal interest over shareholder welfare. Ghoshal (2005) also

attributes this failure to bad management practices resulting from flawed theories taught in business schools that ignored moral and ethical considerations. In recent years, stakeholder theory has gained popularity in business and academic literature due to its practicality for managers and scholars (Jamali 2007). It is understood that corporations should not solely pursue short-term profits, but rather long-term objectives to sustain and thrive in challenging environments (Kakabadse 2005). The social responsibility demonstrated by BP Corporation after the 2011 Oil Spill serves as a prime example of this practice.

BP went above and beyond legal requirements to take quick action in supporting the families and friends of their employees who died in the explosion. They also implemented necessary measures to protect the shore and support those affected environmentally and socially. This resulted in a significant loss in shareholder returns for BP. Nonetheless, the company chose to delay dividend payments to shareholders in order to focus on ongoing corrective measures.

With the aim of preserving BP's long-term development reputation rather than prioritizing shareholder returns, the decision holds particular significance in today's economy where social responsibility is integral to business strategy. In this fiercely competitive environment, dynamic capabilities like social responsibility enable businesses to compete effectively. On one hand, it enhances corporate abilities in areas such as corporate culture reputation, know-how, and technology.

In addition, improving organization reputation can also strengthen relationships with external parties including authorities, investors, and partners. This can lead to increased loyalty among employees and customers, ultimately resulting in long-term dividends (Branco and Rodrigues 2006). However, there is a recent trend where some organizations, despite advocating for social responsibility in theory,

prioritize stakeholder welfare over shareholder funds.

These businesses may utilize media to showcase their commitment to social responsibility and efforts to enhance their reputation in society in order to gain a competitive edge. However, their primary objective remains to maximize profits for company owners. This behavior is commonly referred to as "green washing," where businesses prioritize increasing their profits rather than genuinely contributing to society (Karnani 2010). 4. Implication of literature

There are differing opinions among scholars and practitioners in academia and business regarding the role of literature. One aspect where viewpoints diverge is social responsibility, specifically whether businesses have an obligation to engage in it. Shareholders can choose to participate in socially responsible actions that go beyond legal requirements if they aim to improve their financial position. The connection and interaction between businesses and government remain uncertain.

Determining the role of government and institutional organizations in regulating and strengthening businesses' social responsibility behavior and practices is crucial, particularly for industries or businesses that significantly affect their surrounding community and environment. Instead of relying on voluntary responses from businesses, it is important to establish the level of involvement these external entities should have in business activities.

Even if businesses solely prioritize profits and delegate social matters to the government, they will encounter difficulties, particularly in countries with corrupt regimes and insufficient legal standards. According to Schwartz and Saiia (2012), governments in such chaotic countries are primarily concerned with maintaining control and order, making it unreliable for businesses to rely on them for protection. Consequently, organizations have an ethical duty to either abstain from conducting business or decline opportunities in such nations.